The growth in self-employment has been one of the defining features of the changing world of work in recent years. In the U.K. alone there are over 5 million people registered as self-employed, which represents just over 15% of the workforce.
Research from the London School of Economics explores how the self-employed have fared during the pandemic. The research reveals that the early months of the pandemic were defined by a significant fall in both hours of work and income for the self-employed, with this fall greater than for any kind of worker.
While this recovered somewhat over the summer months, both hours and earnings remain significantly below pre-pandemic levels. Indeed, half of the self-employed people spoken to for the survey revealed that their earnings remained under £1,000 per month by August. While this figure was marginally lower than in April, it was significantly higher than the 33% who reported likewise before the pandemic.
Precarious status
This poor rebound is particularly strong among those with lower qualifications. It’s a finding that was also reported in research by the Resolution Foundation, which found that those with lower qualifications were much more likely to suffer from a prolonged decline in their income.
Those working in the gig economy tend to be doing somewhat better, however, with roughly a third of workers reporting more work than usual. While this is generally regarded positively, a number of gig workers have nonetheless reported that this additional work is harming their health, especially with the risk of infection still a factor. Indeed, roughly 3 times as many gig workers reported health concerns than self-employed workers more generally.
The availability of government support has been a perennial problem for workers around the world, but self-employed workers have been especially concerned after they were initially excluded from support packages. In the U.K., this was eventually rectified, with grants available to self-employed people from May, albeit with each subsequent edition less generous than the 80% of past profits up to a maximum of £2,500 per month that was originally available.
The scheme has been criticized for the criteria attached, however, with estimates suggesting that they rendered around 2 in 5 self-employed workers ineligible for support. What’s more, this eligibility is likely to continue evolving as the scheme extends into 2021, which has promoted the devolved administrations in Wales and Scotland to offer their own additional support to the self-employed, especially if they’re newly thus.
Falling through the cracks
This eligibility matters, however, as the data clearly shows that those who aren’t eligible for government support are twice as likely to report significant financial difficulties than those who are. It’s perhaps no surprise, therefore, that the self-employed have been a key target group for campaigners such as ExcludedUK, who have worked to try and ensure government support reaches all who need it.
The authors admit that designing systems to support the self-employed is far from easy, especially as there is a clear desire not to make any such system open to abuse. For instance, analysis using bank data suggests that the incomes of those receiving state support have fallen by just 4% on average. While this may illustrate that the scheme has helped to smooth out any falls in income, it also illustrates that perhaps the worst affected are not those who are currently supported.
Perhaps unsurprisingly, this difficult period has coincided with the sharpest fall in self-employment levels since records began, with official data showing 8% fewer self-employed people during the summer than was the case in 2019. This is contrasted with the continued rise in the number of salaried workers.
Long-term consequences
This seems likely to be a long-term trend, with the LSE survey revealing that up to one in five self-employed people believe they’re likely to seek salaried employment to try and offset the difficulties they’re currently facing.
This movement is especially high among younger workers and those with a higher income. This shift is likely to result in the self-employed not only being a smaller group of people after the pandemic, but also consisting of very different kinds of workers.
There are also indications that the U.K. government will change the tax rules for the self-employed, which would result in them paying higher National Insurance Contributions, thus further disincentivizing workers from becoming self-employed.
